In a divided opinion, a majority of the Iowa Supreme Court in Robinson v. Allied Property and Casualty Insurance Companyupheld a two-year statute of limitation contained within an insurance policy for underinsured motorist coverage (“UIM”). The plaintiff, Karen Robinson, asserted that she did not discover her injuries exceeded the underlying coverage for more than two years. Nevertheless, the Supreme Court held that the two-year limitations period was reasonable and enforceable as a matter of law.

The plaintiff Robinson was involved in a motor vehicle accident on June 15, 2004. The at-fault driver was insured through State Farm with $100,000 liability policy limits. Robinson’s insurance policy through Allied contained underinsured policy limits of $50,000. The Allied policy also contained language that barred underinsured claims after two years from the date of the accident. Following the accident, Robinson suffered from neck pain. Six months post-accident, Robinson was released from care and told that her injury should gradually repair itself but that it would take time. Robinson hired counsel to negotiate with State Farm. At the time, her medical bills were approximately $5,000. During settlement negotiations, Robinson’s attorney reduced her demand to $20,000 or well within the State Farm coverage. Two years post-accident, Robinson continued to suffer from neck and back pain. Her attorney pursued a claim against the at-fault driver, but no UIM claim was filed against Allied. In addition, counsel for Robinson did not seek a tolling agreement from Allied.

Two and a half years post-accident, Robinson visited a doctor who offered surgical intervention for Robinson. In April 2007, Robinson underwent surgery. Following a successful surgery, the doctor advised that she may suffer permanent pain. At this point, Robinson settled her claim with State Farm for the liability limits of $100,000. Robinson’s counsel immediately notified Allied of her intention to seek UIM coverage and demanded the full policy limits of $50,000. Allied denied the UIM claim as untimely.

Robinson eventually filed suit against Allied more than six years after her accident. Allied moved for summary judgment and the district court granted the motion. Robinson appealed and the Iowa Court of Appeals ruled that the two-year limitation was unreasonable under the circumstances because she was not “able to ascertain her damages” within two years.

In the majority opinion, authored by Justice Waterman, the Supreme Court found that the two-year limitation period was indeed reasonable. To find otherwise, would be to “mount the unruly horse” and subject courts to unnecessary litigation over the reasonableness of delays in filing suit.

While a claim for UIM coverage generally would be subject to Iowa’s ten-year statute of limitations for written contracts, parties may contract for a shorter period of time. Courts will enforce a shorter limitation in insurance policies provided the contractual deadline allows the insured a reasonable period of time to sue for the policy limits. Prior precedent had upheld a two-year limitation period for UIM coverage because it matched the two-year statute of limitation for personal injury actions. In other words, it granted as many rights to the insured as she would have had in the case against the tortfeasor.

Robinson asserted that the two-year limitation was unreasonable in her case because under the circumstances she could not have known the extent of her injuries within that period of time. The majority rejected Robinson’s argument, in part, because Robinson’s argument would require future courts to “embark on an approach that would require sifting through the medical evidence to determine whether the insured had a reasonable basis to believe damages exceeded the tortfeasor’s policy limits.”

Robinson also argued that for plaintiffs to file UIM suits before they have a reasonable basis that their injuries exceed the underlying coverage creates an ethical problem for attorneys and would risk sanctions. The majority opinion dismissed this concern as “overstated” because it is common practice to file a UIM claim along with the claim against the tortfeasor. Further, if the UIM claim is later found to be without merit, “no Iowa court should impose sanctions for filing it to toll the contractual deadline.” The majority also noted that the reasonable course of action for counsel would be to see a tolling agreement for the UIM insurer.

In conclusion, the majority opinion addressed the freedom of parties to contract and expressed a reluctance to interfere with that right. The majority opinion noted the certain danger that follows with invalidating private contracts and to do so is akin to mounting an unruly horse.

Justice Hecht authored the dissenting opinion which was joined by Justices Wiggins and Appel. In the dissent’s view, the Court had “mounted the unruly horse” in the past when it has invalidated contractual limitations, but the Court had “tamed” the horse through opinions that required a reasonableness standard to contractual periods of limitation.

According to the dissent, the adhesionary natural of insurance contracts requires the Court to review the limitations periods for reasonableness under public policy grounds. In the present case, Robison had no reason to suspect that her damages would exceed State Farm’s $100,000 coverage when the two years ran. This is problematic for policyholders and is unreasonable. Further, the dissent noted that inefficiency will result in forcing policyholders to file suit before damages are known. Attorneys will be placed in “no-win situations: risk violating one’s ethical obligations . . . by bringing a frivolous lawsuit against an insurance company for UIM benefits, or risk committing malpractice for failing to file a suit for which a factual basis might exist sometime in the future.”